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Salazar reopens oil shale lands to smaller leases

By {screen_name}
Tuesday, October 20, 2009

The federal government will reopen oil shale lands in Colorado, Utah and Wyoming to research and development leases and at the same time open an investigation into last-minute Bush administration decisions on those lands.

Interior Secretary Ken Salazar announced the second round of leases Tuesday in a conference call to reporters around the country.

The Interior Department already administers six research leases in Colorado and Utah. The second round will start with the same-sized leases, 160 acres, but it slashes the size of commercial leases.

The new lease criteria also are geared to help federal officials answer questions about the effects of oil shale development on water quantity and quality, other environmental effects and socioeconomic factors.

Such information is necessary “before we lunge ahead” with commercial development, Salazar said.

The new lease rules set a minimum production of 10,000 barrels of kerogen per day in order for a lease to be converted to commercial uses.

The new requirements, especially the smaller commercial leases contemplated in the second round, might not prove to be attractive to major oil companies, said Glenn Vawter, executive director of the National Oil Shale Association. Under Bush administration rules, the 160-acre research tracts could be expanded to commercial tracts of 5,120 acres. Salazar wants the commercial tracts limited to a square mile, or 640 acres.

“What’s the big incentive to spend for research and development if it can only be a 640-acre tract rather than one that’s 5,120 acres?” Vawter said.

Smaller entrepreneurial companies are more likely to be interested in the research leases than large oil companies, Vawter said.

When the Bush administration originally offered the 160-acre research, development and demonstration leases, as they are known, more than 20 companies showed interest.

One company spurned when leases were awarded was ExxonMobil.

Officials with that company declined to comment directly on Salazar’s announcement, but spokesman David Eglinton said ExxonMobil “is serious about pursuing oil shale technology and has at least two research concepts that require field testing.”

ExxonMobil will work with all appropriate local, state and federal agencies toward “a careful, phased approach that allows for prudent technical, social and environmental planning and execution,” Eglinton said in an e-mail.

Environmental organizations welcomed the Interior Department’s new approach to oil shale, but questioned the need for a second round of leases, noting that thousands of acres of oil shale lands are in private hands and have not been developed.

“While we disagree that industry needs a second round” of leases for oil shale, the decision is a “step in the right direction towards ending the debate on oil shale development in Utah,” Stephen Bloch, conservation director for the Southern Utah Wilderness Alliance, said in a statement.

The existing sites are “still a decade or more from providing any type of significant findings on air, water, wildlife impacts,” Joe Neuhof, of the Colorado Environmental Coalition in Grand Junction, said in a statement.

Once an announcement is published in the Federal Register, companies will have 60 days to apply for the second round of the leases.

Salazar said he doesn’t know whether the second round of leases will attract several companies or any at all.

Lessees will have to submit development plans within nine months and, after gaining approval from the Bureau of Land Management, obtain state and local permits within 18 months, and “deploy infrastructure” within 24 months.

Salazar said he is asking the inspector general to look into the Jan. 15 issuance of lease addenda that set royalty rates for oil shale and expanded the existing research leases to 5,000 acres.

He sought the inspector general’s investigation to gather all the facts relevant to the lease addenda, Salazar said.

“I need to know what the facts are before I move forward with the lease addenda,” Salazar said. “I’m not prejudging any decision I might make.”

The U.S. Justice Department is investigating the actions of Gale Norton, who served as interior secretary in the Bush administration before going to work for Shell Oil Co., which holds three existing oil shale research leases, all in Colorado.

Salazar and Norton are former Colorado attorneys general.

Colorado Gov. Bill Ritter welcomed what he said were needed constraints on the size of leases and due-diligence requirements for commercial development.

“Colorado has always supported a robust (research, development and demonstration) process to research and evaluate the technologies that could be used to develop oil shale and to better understand the environmental impacts,” Ritter said in a statement.